FX & market recap:
Traders continue to shun the US dollar, at least those of them who are actively trading, and not vacationing. August is vacation month, and Puerto Backyardo is the preferred destination in this Summer of COVID. It also means FX volumes are lighter than usual and FX moves may be exaggerated.
The Trump Administration continues to hammer friends and foes with trade tariffs. Yesterday, the Americans announced the 15% levy on Airbus and 25% tariffs on over 100 European products would stay in place. US Trade Representative Robert Lighthizer said: “The EU and member states have not taken the actions necessary to come into compliance with WTO (World Trade Organization) decisions.”
Traders are looking ahead to today’s weekly US Jobless Claims report. They are expected to be 1.120 million, and according to the Wall Street Journal, the 21st week, they have been over 1.0 million. Nevertheless, if the forecast is accurate, it would be lower than last week and show that the American job landscape is improving.
Canadian dollar highlights:
USD/CAD is probing support in the 1.3220 area and looking to grind through additional support between 1.3190-1.3210. If so, it could free-fall to 1.3100. The currency pair is tracking broad US moves, garnering a bit of support from firm, steady crude prices. Traders ignored domestic politics. The Bloc-Quebecois (PQ) party is threatening to force an election unless Prime Minister Trudeau and Finance Minister Morneau resign. Most believe it is just wishful thinking. The Progressive Conservative party doesn’t even have a leader as Andrew Scheer resigned and as there isn’t a viable alternative party.
Euro highlights:
EUR/USD bottomed out at 1.1710 yesterday and is trading at 1.1840 in NY today. EUR/USD continues to be supported by expectations that the Eurozone economy will outperform the US economy. The American bungling of the pandemic is another factor as many states are still struggling to cope with new cases (55,504 cases were reported yesterday). German July CPI data was as expected and not a factor for FX.
British pound highlights:
GBP/USD tracked EUR/USD gains, as EUR/GBP stayed in a tight range. GBP/USD gains may be limited as long as there isn’t progress in the EU/UK trade talks, leaving the risk of a “no-deal” Brexit at elevated levels. GBP/USD is trading at the top of its 1.3099 from 1.3032 range in NY.
Asia Pacific highlights:
USD/JPY traded in a narrow 106.58-106.88 band. Upside momentum waned with the dip in US Treasury yields. Meanwhile, AUD/USD chopped about in a 0.7157-0.7186 band supported by a general bearish US dollar sentiment and by a stellar employment report. Australia added 114,700 jobs in July, well above the 40,000 forecast and the unemployment rate fell to 7.5% from 7.8%.
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